Peter Scheller
Berater für Wirtschaftsprüfer, Rechtsanwälte, Steuer- und Unternehmensberater

„Wenn es knifflig wird.“

Foreign source income and German income tax

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Foreign source income and German income tax

Foreign source income is in general not subject to German income taxation if a person is not resident in Germany. However, in years where a person enters or leaves Germany this sort of income might affect the progressive German income tax rate on taxable income in Germany. In these cases the tax rate will be calculated on the basis of the world-wide income except the income on capital investments and capital gains of the same. Capital income is taxed at a flat rate of 25% plus a solidarity surplus charge (combined tax rate about 26,375 %).

Foreign source income will have an effect on German income taxation if the following situations arise:

  • The person is subject to German income taxation for part(s) of the calendar year.
  • The person receives income while being a tax resident in Germany which is taxable in Germany.
  • The before mentioned income does not result in an income taxation at the maximum rate (combined tax rate inclusive solidarity surplus charge: 47,48 %)

If the before mentioned applies, foreign source income not being taxable in Germany will increase the German income tax rate. Consequently the tax burden in Germany will  increase.

Example: The US citizen A is living in Germany and works for a German employer. On 1 of July his employer sends him abroad for 24 months on an assignment contract. A gives up his tax residency in Germany and relocates himself to the work destination. A receives a gross salary of € 70,000 for the first half of the year which results in a taxable income of € 50,000 after deductions and allowances. A receives a gross income for the rest of the year of € 90,000. In the second half of the year he has work related expenses such as relocation expenses, costs of telecommunication, travelling costs and working materials of € 20,000. The income tax on an income of € 50,000 for a single person would be € 13,483 (tax rate: 26.97%), but A’s income tax rate will be calculated on the basis of € 120,000 (income taxable in Germany of € 50,000 + foreign source income of € 70,000). The tax rate on € 120,000 is 37.06%. The German income tax is € 18,530 (€ 50,000 * 37.06%). The increase in German income tax of about € 4,000 is caused by the increase of the tax rate.

The example shows the following:

  • Foreign source income which is not taxable in Germany may have a considerable effect on German income tax. This is especially the case if a person moves to Germany or leaves Germany within a calendar year.
  • It also shows that work related costs caused by foreign activities have a decreasing effect on the German income tax rate. If for example A would not declare his work related costs of € 20,000 in his German income tax return the tax rate would be calculated on an income of € 140,000 which would result in a tax rate of 38,10% and an income tax of € 19,053. Through declaring the work related expenses on his foreign activities he reduces his German income tax burden by about € 500.

Notice:

(1) Above mentioned circumstances given, income which is not taxable in Germany has to be declared in the German income tax return.

(2) Expenses related to income which is not taxable in Germany can be deducted and decrease the German income tax rate.

(3) Foreign source income has to be calculated in accordance with German tax regulations. This means that special deductions and allowances can be deducted. A good example would be relocation expenses. Not only direct costs like travelling costs, removal expenses etc. are deductible but also standard amounts for other expenses. These amounts can be deducted without any proof.

(4) Foreign source losses such as those from rental activities may also have a reducing effect on the German income tax rate.

Author: Peter Scheller, German Tax Adviser – Master of International Taxation

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Kommentare

Kommentar von stan smith |

If German citizen has children who are usa citizens and all financial assets are in usa and brazil do the children have to pay any German inheritance tax if there are no German financial assets and children reside in the USA?

Antwort von Peter Scheller

It does not matter what citizenship the decendent or his/her hairs are. It only matters if one of before mentioned persons are resident in Germany in the moment of decent.

Kommentar von Prashanth Prasad |

Hi
Is there a possibility of tax refund getting rejected if the amount earned in foreign land is more than the minimum limit. I believe for FY19 it minimum limit was Euro 9000

Antwort von Peter Scheller

You only get a refund, if you paid any taxes in Germany.

Kommentar von Colin Short |

How many years or what is the timeframe that the finanzamt can reclaim tax, some people have told me only back as far as 5 years.

Antwort von Peter Scheller

It depends on various factors. The maximum is 13 years if the tax authorities consider tax fraud. You better ask a expirienced tax adviser in order to avoid risks (taxes, interests, penalties).

Kommentar von Mikhail Shirokov |

Does IRS report a US citizen's income to the Finanzamt in Germany? Or conversely, does the Finanzamt request information on US citizen's filed/(bank or employer reported) income who resides, works and files taxes in Germany?

Antwort von Peter Scheller

Seldom, but it happens.

Kommentar von Colleen Schleife |

I live in Germany with my children but work as a flight attendant out of London England. I am gone 183 days a year. Is my foriegn earned income subject to German taxes?

Kommentar von Colleen Schleife |

Also in 2016 and 2017 Germany taxed me on my foriegn health insurance as freiwillig versicherung, i am currently fighting this. I work for US based airline and am not entitled to German gesetzlich versicherung or Obamacare. In the US any company with over 50 full time employees must provide health insurance for it employees to a minimum standard. Can Germany tax me on this benefit like it is a luxury benefit similiar to a company car?

Antwort von Peter Scheller

You need an expirienced German tax adviser.

Kommentar von Irande Raulio |

I've just recently become a tax resident in Germany but make my income entirely in Ireland from employment there. I currently pay taxes in Ireland but I should really be paying them in Germany.

While this is technically tax evasion, what is the worst thing that can happen if I don't declare any income in Germany? How could the German state find out about my income abroad?

Antwort von Peter Scheller

You only have to pay income tax on the income which is connected to your working time in Germany (physical presence).

If the German tax authorities find it out:

  • Payment of taxes
  • Interests
  • Penalties (can be severe)

Kommentar von PETAR ATANASOV DAMBOVALIEV |

Hi,
I have some US shares and I live in Germany but I'm not a German citizen.
The US does not tax non residents for capital gains. Will I have to pay capital gains tax to Germany for my US shares?

Antwort von Peter Scheller

Kommentar von Sanky |

How much tax do I need to pay If I work whole year outside?

Antwort von Peter Scheller

This depends on various matter (such as tax residence, state of work etc.). You should consult a tax adviser.

Kommentar von AAYUSH |

I worked in poland from jan to march for 2019 and paid all taxes there itself,Now i move to germany on 1st april 1st and i become tax resident of germany, While declaring my income in germany do i need to provide poland income detail also in germany?

Antwort von Peter Scheller

Yes, see https://scheller-international.com/blog-beitraege/foreign-source-income-and-german-income-tax.html

Kommentar von Dorothy |

I’m a US citizen (married to a German), living in Germany and working for a German company, but I’m also an author for a US publishing company. Do I claim my US royalties on the German tax form, and if so, are they then exempt from being taxed in the states through the Foreign Earned Income Exclusion form which I file with my US taxes? Also, would this change if I no longer worked for my German employer?

Antwort von Peter Scheller

The royalties will be taxed in Germany at the regular rate. You have to declare them in your income tax return.

Whether you can use the foreign earned income exclusion has to be discussed with a US tax expert. Otherwise you will be able to credit your German income tax against the US tax.

Whether you work for a German employer or not is irrelevant in this respect.

 

Kommentar von Alex |

I'm a dual US-German citizen living in Germany. I hold stock in the U.S., which I sold, and have to pay U.S. taxes on the capital gains. Apparently, I am required to pay taxes on the capital gains in Germany as well. Is this correct? I thought the tax agreement between the countries was created to avoid double taxation.

Antwort von Peter Scheller

Double Taxation Treaties not always avoid double taxatio scenarios.

However, in you case it looks to me that the German tax on capital gains can be credited against the US tax. I think you need the Support of a professional US tax expert.

Kommentar von Stefano |

I have lived in the US half of the year and have I received income (US employer) for which I have already paid taxes in the US. Now I moved to Germany and live here. Do I need to pay taxes in Germany for the US income?

Antwort von Peter Scheller

Not, if you were not tax resident in Germany while receiving the income. However, you have to declare it on your German income tax return because it has an influence on your German tax rate.

Kommentar von Khanna |

I was on deputation in Germany for 7 months, where my home + German salary was paid & taxed. Am I to declare the rest 5 month's home salary as foreign income ?

Antwort von Peter Scheller

Yes, Just read the article.

Kommentar von Ritesh |

Hello, I moved to Germany from India for Job purposes in February. I started my work in Germany since February before which i was working in India for the month of January. As I spent 11 months of 2019 in Germany, i am a tax resident in Germany. While declaring taxes, do I habe declare income from India for month of Jan?

Antwort von Peter Scheller

Yes. Just read the article.

Kommentar von Aera |

Hi, I'm residing and working in Germany. Also my wife residing and working in Germany. We both have been paying Lohnsteuer and filed tax declarations for last 3 years. We are not German citizens yer and from India. Now my wife is in negotiations with an Irish employer who is offering home office due to covid 19 meaning her physical presence is in Germany but receiving salary and paying taxes in Ireland. Would she have any obligation to German tax authorities? Also would I have any obligation on her behalf as I would continue to be in Germany for work and paying taxes accordingly as normal.

Antwort von Peter Scheller

Your wife has to pay taxes in Germany because she works physically in Germany. That her employer is situated abroad and the salary is paid there is irrelevant. She has to file income tax returns in Germany.

Kommentar von Lee Macey |

I have been living in Germany since December 2017. I have accepted a transfer to Dubai which will take effect in the next six weeks.

If I do an Abmeldung and completely leave Germany prior to starting my new job as a Dubai resident, will the Finanzamt still want details of my Dubai earnings for the October-December period of this current tax year?

And if I don't Abmeldung and keep an address in Germany, what happens then? I will be a resident of Dubai, but have also been in Germany more than 182 days over the last three years.

How does tax on foreign earned income differ to the rates and insurances collected at source when working normally in Germany?

Antwort von Peter Scheller

1) If you give up resicency in Germany the income October - December will not be taxed in Germany but will have an effect on you German income tax rate. Therefore it has to be declared in your 2020 income tax return.

2) If you keep you residency in Germany you have to tax your entire world wide income in Germany. Foreign tax might be credited against the German tax (as far as I know there is no income tax in Dubai).

3) How your German income tax will be affected by foreign source income requires a full analysis of you tax situation.

Kommentar von Lydia |

Hello, I am a German citizen currently living in the UK and earning all my income in the UK. With my employer's new home office policies I am considering buying a property back in Germany to live in for part of the year (less than 6 months in any given tax year). I will still be considered a UK resident and taxed in the UK, but I want to understand if I will be considered a German tax resident as well due to the ownership of the property - will I be double taxed due to the owned domicile in Germany?

Antwort von Peter Scheller

How the property in Germany will affected dpends on a lot of factors (source and type of income, main residence etc.). You need a professional adviser.

Kommentar von Muna |

I live in Germany (not German citizen), but currently work overseas with a foreign employer. my duty station is out of Germany where I work most of the year. In this case, do I still have to pay the taxation in Germany?

Antwort von Peter Scheller

It dependsn a lot of factors You need professional help.

Kommentar von Bruno Panaro |

Hello, I plan to have my main residence in Germany while commuting to Qatar (no tax treaty with Germany). I will keep two households one in Germany and other in Qatar (due to work) Can I deduct both: my travels (by airplane paid by me and not by the company) to and from Qatar and also my expenses like apartment rental and bills (light / water / A/C / phone / internet) from that said secondary household from my income tax?

Antwort von Peter Scheller

You may deduct all these expenses.However, it seems advisable to contact a prfessional tax adviser.

Kommentar von Nicholas |

If I work for a german client remotely, outside of Germany, for more than 183 days per year, do I have vested interest to move my tax residency elsewhere and how do I practically achieve that? E.g.
- proactively contact Finanzamt, Abmeldung, Cancelation of German Private health insurance etc? Is this something I need to prove or the opposite?
PS : I worked 4 years in Germany but never was asked to file taxes, have never filed a tax return and Finanzamt told me I don't have to

By your experience, how likely is a control of bank deposits and income received in non German banks of the EU and how severe the fines can be? (I was not able to find the relevant legislation on the internet)

Antwort von Peter Scheller

(1) You have to give up your home or habitual abode (see https://scheller-international.com/blog-beitraege/german-tax-residence.html).

(2) There is a possibilility that the German tax authorities will ind out that you did not declare the capital income.

(3) the penalties depend on the amounts which have not been declared.

Kommentar von Akshay |

I have a German permeant residence (unbefristet niederlassungserlaubnis) & currently I am working and living in India. My wife and son live in Germany and are German citizens. I keep visiting my family very often but due to Covid crisis I have not traveled to Germany since January 2020, I intend to relocate to Germany for a few months, till end of Jan 2021 and work from my German residence. My last exit from Germany was on the 9th of January. Will there be any taxation if I work from Germany ? My employment contract is in India and I pay my taxes in India. My intended stay would be approx 121 days this year and 30 days in January 2021 also I was already there in Germany for 9 days beginning of 2020. I am not sure if there are any taxes that are applicable considering there is a " AGREEMENT FOR AVOIDANCE OF DOUBLE TAXATION AND PREVENTION OF FISCAL EVASION WITH GERMANY" - Can you please. Thanks a lot.

Antwort von Peter Scheller

Whether you have to pay taxes in Germany depends on a lot of facts (main residence, type of contract with your employer etc.). You need professional advice.

Kommentar von Kristina Leitz |

How would a US partnership be treated if effectively managed in the US by my partner, but I am in Germany, receiving payments. All business clients served are US based businesses. I would not be working with this business in Germany with occasional trips stateside. In Germany I would have a separate business.

How would my income from partnership be taxed.

Antwort von Peter Scheller

Your income might be tax-free income with an effect on you German income tax rate. However, the case needs a professional analysis.

Kommentar von Sunny Kalra |

I’m an Australian citizen employed by an Australian company and I’m Moving to Germany for 3 months with my Wife who’s German citizen. I’ll get paid in my Australian bank account whilst I’m in Germany. Do I have to pay tax in Germany ? Are there any implications for the employer?

Antwort von Peter Scheller

Yes, you will be tax resident in Germany. Therefore your salary will be taxed in Germany if you physically work in Germany.

Your employer does not have any obligation. You have to file income tax returns. Whether you have to fulfil social security obligations has to be investigated.

Kommentar von Eric |

I'm a foreign citizen with permanent residency. I have been living in Germany for 8 years. I started paying tax as intern in late 2013. I did not realise that I need to pay tax on stocks and dividends in my home country. It's only probably a few thousand euros per year.

I never filed tax return as employer deductes tax from salary directly.

Would it be fine if I start filling tax and declaring from 2016 onwards (as it's still available for declaration this year) or it will be much more complicated?

Will the losses from stock market and the money loss for starting a small business in 2016 be used to deduct taxable income?

Many thanks in advance!

Antwort von Peter Scheller

You really need a good German tax adviser in order to avoid any risks. Not declaring income is a criminal offence in Germany.

Kommentar von Alessandra |

Hi, I'm an Italian citizen who lived and worked in the US until June 2019. I filed taxes for the period Jan - June 2019 in the US and filed the tax return for Germany for the period July - Dec 2019.
I have received the notification I'll have to pay additional taxes on my income. My question is: is this a mistake or that's how my Germany taxes a foreign income? I was expecting a good return, the only reason why I filed them. If this is a controversial situation, what are the actions I could take?

Thank you so much in advance!!

Antwort von Peter Scheller

Whether this is correct or not can only tell you a German tax adviser. It depends on various issues such as you tax class, the income before you relocated to Germany and other factors.

Kommentar von Husso |

Can you advise on implications for German tax resident receiving rental income from the U.S. The U.S. has very favorable taxes for rental properties (e.g. depreciation expense) which has resulted in negative income from the property. Presumably the Finanzamt would apply some other formula. Will this income affect my German tax rate or is it treated differently?

Antwort von Peter Scheller

It will affect your German income tax rate.

Kommentar von Aish |

Does a study scholarship received from another EU country count as 'income' in Germany? This is being sent by a University abroad that a student is remotely enrolled in (due to COVID).

Antwort von Peter Scheller

Scholarships are tax free under certain preconditions (see § 3 No. 44 Einkommensteuergesetz / German income tax law).

Kommentar von M S |

I would like to get your advise on my taxation. In 2015 started my internship in Germany for six month. after that I started my Research job in Belgium for 3 years where I paid all my taxes. after that I came back to Germany any start my job here since 2018. Is it possible to include my taxation in Germany that I had paid in Belgium? please give your advice?

Antwort von Peter Scheller

I do not understand why you paid taxes in Belgium if you worked in Germany.

Kommentar von nv |

Hi, Peter! Thank your very much for the blog-post!
Could you please help me with the following situation?
I am not a EU-citizen, and back in my home-country I have established what is close to the German self-employed/freelancer entity through which I am providing services to US companies as an independent contractor.
Now I also have a German employment contract (so I am physically present in Germany), yet the self-employment/freelance services are still being provided for which I pay tax in my home-country (the profit is not generated in Germany). There is an agreement between Germany and my country regarding double taxation regulations however, but still, do I have to file this additional income in Germany?
And if so, would my additional income be taxable in Germany, or would it be just used to adjust the tax rate on my German salary?
My contract is for one year and I am not sure whether I will want to extend it beyond that time...
Thank you so much for your help!
NV

Antwort von Peter Scheller

Your questions are not easy to answer because much more information about the whole situations is required.

Kommentar von Sam |

Hi, If I receive property rental income from the US and move to Germany with no income in Germany. I understand foreign income is changing the tax rate in Germany. But if I have no income in Germany, will I need to pay tax in Germany? Thanks

Antwort von Peter Scheller

That depends on your overall tax situation. If you have only US rental income there will be no German tax liability.

Kommentar von Will |

Hi Peter - Thank you for this and other helpful posts. I want to clarify my understanding for my situation.

- I moved to Germany in June 2020 and earned €60,000 from my German employer for June - December 2020.
- Prior to June, I was in the Netherlands and earned €200,000 (so high because it included a severance payment).
- I also had rental income of €20,000 and rental-related expenses of €10,000 in 2020, plus over €10,000 of rental-related expenses carried over from prior years.

1. In this case, will my tax rate be based on a total taxable income of €260,000 (since the rental income is fully offset by rental-related expenses) or €280,000?
2. If the latter, will the full €60,000 of wage income earned in Germany be taxable at 45%, even though I already paid Dutch taxes of close to 48% on my Dutch income?

Antwort von Peter Scheller

The tax rate might be calculated on an income of 270,000 Euro if the rental expenses are in line with German tax law.

How high your tax rate will be depends on a lot of factors such as your family situation etc. You may seek the advice of a German tax adviser.

Kommentar von Will |

Thanks very much! One last clarification: how did you arrive at €270,000? Is it because you reduced the €20,000 rental income by the €10,000 of current year rental-related expenses, but the carried over losses from previous years (interest paid in the past) cannot be applied?

And yes, my tax situation is definitely a bit complicated so I've reached out to a couple tax advisors for quotes already. Thank you and happy new year!

Antwort von Peter Scheller

I hope you find the right one.

Carry over losses can be used in NL but not in Germany.

Kommentar von Will |

Ah thank you. I should have clarified: the rental income and carry-over losses are for a property in Germany.

Also, I'm going to send you an e-mail separately to see if you might be interested in taking me on as a client.

Kommentar von Anja |

Hi - my employer is in Uk and I pay uk tax and national insurance. I normally commute from Germany where my family lives to the Uk but spend more than 180 days in uk. Due to COVID I was unable to commute during 2020 and hence I have spend less than 180 days in UK. Whilst „stuck“ in Germany I continued working for same UK employer but from Germany (home office). The minute borders open again I will be travelling again back and forth to uk. (June 2021?????) Does this make me now a German tax resident and do I have to submit a German tax return ?

Antwort von Peter Scheller

A tax residency in Germany requires a home or habitual abode in Germany (see https://scheller-international.com/blog-beitraege/german-tax-residence.html). You may have a tax residency in two countries.

Where you have to tax your salary depends on the double taxation treaty (and the fact where your centre of vital interests is). Obviously you have spend more than 183 days in a tax year in Germany. Under normal circumstances you would have become tax liable with your salary in Germany. However, for 2020/2021 there might be exception because of the situation. How German tax authorities will classify cases like yours is so far pretty unclear.

 

Kommentar von Paul |

I'm currently a masters student in Germany, but I own two houses back home in another EU country, and have investments through banks and brokers in my home country as well. I have no income through the properties. I pay tax back home on my capital gains back home. The income is kept outside of Germany along with most of my assets.

Do I own any tax to the German government?

If I start working in Germany, will I then have to pay tax on my income from back home even if I don't bring it in Germany?

Antwort von Peter Scheller

Income from capital investments will be taxed in Germany (including capital gains) if you are permanently resident in Germany.

How the double taxation on salaries will be avoided depends on the double taxation treaty between Germany and you home country.

Kommentar von SH |

Hi Peter, all the information over here is incredibly helpful. I have a small question.
I am a resident of Germany and work here for several years and make tax returns annually which quite straight forward since I have had only one source of income ( my job over here) .

Last year i sold a property I inherited from my father abroad and left the money in the back account over there. I paid capital gains tax on it in that country as well. Do i declare that income in tax returns for the last year ? I guess it is only used to adjust the tax bracket and no further taxation on it ( because of tax treaty between the two countries) correct ?
I appreciate your help. Thanks

Antwort von Peter Scheller

Whether you have to declare anything depends on the country where the property is situated and how long you father owned the property.

Kommentar von Nicholas O'Brien |

I'm 58 and live in Bremen with my wife and two children. I can start to take a UK pension anytime and if I were a UK Tax Resident when I take it I am entitled to a 25% tax free lump sum. I plan to go to my house in the UK for just over a year to do some work on it and eventually sell it. I plan to live alone in the UK from December 2021 to January 2023. I will retire whilst there in June 2022 hopefully as a UK Tax Resident. All the time my wife and children would remain in Bremen. Can I be sure that Germany will not be able to tax my UK pension tax free lump sum? We have no other family Income in the UK nor in Germany.

Antwort von Peter Scheller

You will not be taxed in Germany if you give up your tax residence in Germany (no home, no habitual abode).

Kommentar von Vijay74@yahoo.co.uk |

Hi Peter, thanks for the detailed blog and the opportunity to ask questions. I am a German tax resident employed in Munich. I am planning to register a business partnership in Canada catering to global customers. Do I need Gewerbeanmeldung in Germany to receive the income from this in Germany? Under what head do I declare this income towards my German tax return? Look forward to your response. Thanks once again.

Antwort von Peter Scheller

You really need to consult a German tax adviser experienced in international taxation. There are various tax issues to be considered.

Kommentar von Alexandra A. |

Hi! I am an EU citizen currently living in another EU country (Romania). I will receive income from the US in the form of my brother΄s savings (he died last year and I am named beneficiary on his bank accounts in the US). I will have to pay an income tax on that money in Romania. I intend to move to Germany and register as resident at some point in the year 2021 and my question is if I have to pay tax again on that money in Germany or if that amount will be taken into account when they calculate my taxes for 2021 in Germany (and what does that mean?). What kind of an accountant should I contact in Germany to get a clear picture of what my taxes would be? Thank you in advance!

Antwort von Peter Scheller

The income will be tax-free in Germany if you received it before relocating to Germany. However, it has an increasing effect on your German income tax rate. You may contact us.

Kommentar von Rajiv |

Hi

I am a US Citizen who has been in Germany for 2 years as a freelance software developer on a freelance visa. Recently I started a eccomerce website registered in the US . Selling products based in the US to people in the US. All the money is in US bank accounts.

Do I need to pay tax for this in Germany? Would I be liable for VAT on this income? Would i have to change my status from freelancer to self employed and open a gewerber in Germany? I have outscored all the work to another company in the US so I don't have any product or do much in Germany.

Antwort von Peter Scheller

These are all good questions. Whether you have to pay income tax on this income depends on a lot of questions such as

- Type of company in the USA

- Place of effective management

- Permanent establishment in the US and/or Germany

It is not very likely that you have to charge German VAT to US clients.

However, your situation requires a serious analysis and a proper tax advice.

Kommentar von Jim |

Hi there!I used to live in the UK till August 2020.On the 21st of September I have moved to Germany where I have started working.I have paid taxes for the UK income, so I was wondering if I need to declare this income in the tax declaration of 2020, as I was not even living in Germany during that period and also my staying in Germany was less than 6 months for this year.Thanks in advance!

Antwort von Peter Scheller

If you became tax resident in Germany in 2020 (taking a home) then you have to declare your entire income for the year. However, the income from foreign sources received before relocating to Germany is tax-free but has an increasing effect on your German income tax rate.

For 2020 you have to file a German income tax return.

Kommentar von John |

Hi there. I have a part time job in Germany and I am paying tax for it. I did some investment last year in CFD market abroad and I lost some parts of that money. I was wondering can I get tax reduction for this loss?
Best Regards

Antwort von Peter Scheller

You can deduct losses against wins of the same kind. If there are no on in one year you can carry them back or forward. You have to file a income tax return to get the statement of losses.

Kommentar von Robert |

Hello,
I am Canadian looking to return/retire to Germany. My income is paid by the Government of Canada as Veterans benefits and will be paying a withholding flat tax, as a non-resident taxed at the source.
As Canada and Germany have a tax treaty in regards to double taxation and I have also lived/worked in Germany 20+ years previously, I will be receiving my German Pension in a few years. What would be my tax obligations to Germany on my Canadian income?

Thank you in advance,

Antwort von Peter Scheller

I did not checked on the provisions of the tax treaty with Canada. However, it is very likely that the Veterans benefit will not be taxed in Germany but this needs some investigation. The German pension will be taxed in Germany.

Kommentar von Phil Chapman |

Hi,
I will be starting a new job for a company based in Gremany. I am a UK resident and will be working from home in the UK. Once COVID is under control each month i will work in Germany for say 5 days, the rest of the month in the UK.

My new German employer has said they will have to tax my income while i am in Germany through the German tax office.

How do i avoid paying UK income tax on those 5 days as i have paid German Tax on those 5 days.

The number of days per month in Germany will vary.

Any advice is very welcome.

Regards

Phil

Antwort von Peter Scheller

You have to pay taxes in Germany on the part of the salary which is attributable to the work physically performed in Germany. However, the full income may be taxed in Germany if your main residency is transferred to Germany.

How a double taxation is avoided has to be checked by a British tax expert. Either the UK does not tax this part of the income or it credits the German tax against the UK tax.

Kommentar von Manuel |

I'm trying to determine whether an Argentinean national living in Germany will have to pay German taxes when selling an apartment in Argentina.

Antwort von Peter Scheller

I would not think so. However, you have to declare the gain in your German income tax return since it has a effect on your German income tax rate.

Kommentar von Akshay khanna |

Hello,

Thank you very much for such an informative article. I want to ask you a question like many others have. I am a tax resident of Germany for last several years. All my income is from German Salary only. However I do keep sending money to my native country in India where I makes some investment which grows as interest rates are attractive back home. Also I brought a flat in India from which I get monthly rent. All my earnings in India is taxed in India and I file my tax returns in India every year for all income that is generated on Indian soil. Iam also paying all my taxes here in Germany as well.

My question is do I have to show my earnings in India even though those earnings are already taxed in India. All the earnings in India is generated from money sent from Germany to India which gets reinvested and grows. I read that there is double taxation avoidance agreement between both countries. Can you please advise.

Thanks a lot and regards
Akshay

Antwort von Peter Scheller

If you are tax resident in Germany you have to declare your entire capital income (dividends, interests, capital gains) in Germany. Where the investments are held in a bank is totally irrelevant. However, you should consult a German tax adviser to get things sorted out.

Kommentar von Kevin L |

Hello,
I'm moved to Germany thru family reunification visa and still maintaining my employment with the company in my home country ( i.e working 100% remotely from Germany). My salary and taxes are paid in home country . I've checked we have double taxation agreement , hence I believe my scenario will fall under the proggression tax. However, I dont have any other income in Germany, would this sole foreign income be liable for any further tax ?
Another question - I am married and plan to do joint tax return, will it impact the tax rate for my wife's portion, she is fully employed in Germany. Would it be better off if we do a seperate tax return ? Thank you.

Antwort von Peter Scheller

Tó analyse your tax situation much more information is required.

Kommentar von vinay |

Hello,

I will be relocating to germany soon and i plan to continue working with my current employer (in india) 100% remotely from germany atleast for the next 6 months. Will i have to pay taxes in germany as well, since my salary and my taxes are already being paid through my indian bank?

Antwort von Peter Scheller

If you perform you work in Germany you have to pay taxes there. How the double taxation scenario can be avoided is matter of the Double Taxation Treaty Germany/India.

Kommentar von Rachit |

Hi Peter,
Thanks for the article. I have a question and would be of great help if you can answer it. I am currently based in Germany and came in November 2020. I continued to work remotely for my Indian company and was taxed there in India. In my stay till date, I have not earned any thing by working in any organization in Germany but continued to work for my Indian company. How will the taxation happen in this case. According to my understanding, Germany and India have signed a dual taxation treaty.

Antwort von Peter Scheller

You certainly need to file a German income tax return and to declare the income. Probably you have a tax credit in India. Consult as tax adviser.

Kommentar von Adrian Platica |

I'm a US citizen living and working in Germany. I hold investments as mutual funds in US. For the dividends and interest from my US mutual funds do I need to pay taxes in Germany? Every year I file and paid taxes in US for these investments already. Is not clear to me the US – Germany tax treaty for dividends and interest.

Antwort von Peter Scheller

You have to pay on all kind of income from capital investments (dividends, interests, capital gains) income tax in Germany when you are resident in Germany. In 5the US you may apply for a tax credit.

I think you need the support of a good tax adviser.

Kommentar von Miroslav Begoni |

Hello I'm from Croatia but currently working in Dubai. So I'm UAE resident. I was living in Croatia whole life and in Germany one year before I moved in Dubai 2019. I don't have any residency in Germany or Croatia. I'm completely checked out, but my wife and two sons live in Germany.
I'm more than 183 days out of Germany.
Do I have to pay tax?
Is there any tax free limit?

Antwort von Peter Scheller

The answer of your question requires a datailed analysis and professional advice.

Kommentar von Sven Westermann |

Hi Peter,
Thank you so much for all the information.
I live in Germany (I am German ), but my income is generated from a US partnership in an LLC. The LLC is actively managed by my partner in the US. 100% of the business clients served are US based businesses.

How would my income from the LLC / partnership be taxed in Germany?

Any help is greatly appreciated.

Thank you!

Antwort von Peter Scheller

See here:

https://scheller-international.com/blog-beitraege/the-unwanted-permanent-establishment-in-germany.html

https://scheller-international.com/blog-beitraege/llc-limited-liability-company-and-german-taxation.html

Kommentar von Alex |

I am a shareholder (40%) and a director of a company in Czech Republic and I reside in Germany at all times. If I want to pay myself a salary from the Czech company would I be double taxed ? and do I have to open a German branch of the Czech company ?

Antwort von Peter Scheller

Your case requires professional advice.

Kommentar von Abu |

I am a US resident recently married to a German citizen and in process of getting registered to reside in Germany. My full income will continue to come from my US employer and I get paid for a work I do outside outside the US and Germany. My job is going 4-6 weeks assignment to different countries at a time. I do 5-6 countries annually. Meaning I spend most of the year on my job assignments. My wife works full time in Germany and files her taxes. I file my taxes in the US but do I need to file tax in Germany as well? Thank you in advance for your advice.

Antwort von Peter Scheller

Your case has to be analyzed in more detail.

Kommentar von Georgia Tsaloli |

Hi, I have relocated for 4 months in Germany (mid Aug-mid December) and have a full-time job here. I have been tax resident in Sweden since 2018 where I still have an ongoing contract for the whole year (except these 4 months that I have got a percentage of leave of absence). Do I have to make a tax declaration in German or only include my income from Germany in my Swedish tax declaration? Thank you in advance.

Antwort von Peter Scheller

You are not liable to German income tax and social security contributions if

a) your main residence remained in Sweden and

b) you are in Germany on an assignment contract

If this is not the case you better consult an experienced tax adviser.

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